Ouch! Why Tesla, Inc. Stock Got Slammed Thursday

MarketsMotley Fool

What happened

Shares of Tesla (NASDAQ: TSLA) fell as much as 8.9% on Thursday, in the aftermath of the company's third-quarter earnings release. The stock is down about 7% at the time of this writing.

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The stock's decline likely reflects disappointment in the company's wider-than-expected loss per share and an approximately three-month delay for Model 3 production. Tesla reported a non-GAAP loss per share of $2.92, worse than its non-GAAP gain per share of $0.71 in the year-ago quarter and worse than a consensus analyst estimate for a loss of $2.31.

So what

Tesla's revenue and vehicle sales were up in Q3, rising about 5% and 30% year over year, respectively, compared to the year-ago quarter. But production bottlenecks for Model 3 weighed on results and guidance.

High initial production costs for Model 3 combined with limited-volume production meant the company's non-GAAP automotive gross margin fell from 25% in Q2 to 19% in Q3. This was the primary reason for Tesla's wider loss.

In addition, worse-than-expected Model 3 production during the quarter, primarily due to a bottleneck in its battery module assembly line at its Gigafactory, meant Tesla only produced about 260 Model 3 units during the quarter. As a result, Tesla now expects to achieve its production target of 5,000 Model 3 units a week in "late Q1" instead of by the end of the year.

What now

Despite Tesla's Model 3 production challenges, the company said it was confident it can rapidly ramp up Model 3 production, albeit about three months behind schedule.

Management explained:

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Daniel Sparks owns shares of Tesla. The Motley Fool owns shares of and recommends Tesla. The Motley Fool has a disclosure policy.